What sanctions could the United States and its allies impose on Russia if it invades Ukraine?

U.S, the United Kingdom and the European Union have been secretly negotiating for the last few weeks a battery of sanctions with which to hit Russia if you decide to invade Ukraine.

The punishment would be unprecedented, according to the leaders of Western nations, and would exceed the sanctions that were adopted after the Russian annexation of Crimea in 2014.

These are the retaliation U.S and its allies evaluate:

KEEP RUSSIA CHIPS FREE

Washington has an ace up its sleeve that it has never used against another country: the so-called “Foreign-Produced Direct Product Rule” that would limit Russia’s access to chips.

If applied, companies located outside the US would be prohibited from exporting chips to Russia as long as these are produced with US technology, Robert D. Atkinson, president of the Foundation for Innovation and Information Technologies, a think tank in Washington DC, explained to Efe.

The impact would be huge because almost any technology relies on semiconductors, from smartphones and computers to systems for energy extraction, aviation and heavy industry.

Chip production, especially those used for advanced computing, is dominated by the US, Japan, South Korea and Taiwan; while Russia barely has domestic production.

The US has never used this tool against a nation and has only used it once against a company: China’s Huawei, whose revenues fell by 30% last year.

For now, Washington has not revealed what the scope of this action would be, that is, if it would be limited to some industrial sectors or if it could affect Russian citizens’ access to consoles, tablets and mobile phones.

SANCTIONS ON LARGE RUSSIAN BANKS

U.S The US and the European Union already imposed sanctions on some Russian financial institutions in 2014, but now the White House has considered acting against the big Russian banks and even against the Russian Direct Investment Fund (FIDR), which catalyzes investment in the sectors most important for the Russian economy.

Among the financial entities that are in Washington’s sights are Sberbank, VTB Bank, Gazprombank, Vnesheconombank and Rosseljozbank, five of the most important in Russia that after the Russian annexation of Crimea already saw how the EU limited their access to markets primary and secondary capital.

Now, these and other entities appear in a bill that has been prepared by the influential US Senator Bob Menéndez, chairman of the Senate Foreign Affairs Committee, with the support of the White House and which outlines some of the actions that Washington could take against Moscow if it invades Ukraine.

REMOVE RUSSIA FROM THE SWIFT BANKING DATA SYSTEM

Another possible retaliation outlined in that bill is to exclude Russia from the Swift transaction consortium, which is the basis of the global financial system because it is used by 11,000 banks in 200 countries or territories to make transfers.

This punishment has been dubbed the “nuclear option” due to the dire consequences it could have for the Russian economy and for the value of its currency, the ruble.

In 2012, Swift cut ties with around thirty Iranian banks after the EU imposed sanctions and due to pressure from U.S, which contributed to the decline of the Persian economy.

NORD STREAM 2

Another possible retaliation against the Kremlin would be to cancel the Nord Stream 2 gas pipeline, which seeks to transport Russian natural gas directly to Western Europe bypassing Ukraine and whose certification process is paralyzed, so it has not started operating.

The German chancellor, Olaf Scholz, has not come to assess what the future of that gas pipeline could be.

However, the EU High Representative for European Affairs, Josep Borrell, assured earlier this month that the project is “linked” to the situation in Ukraine.

LIMITS ON THE PURCHASE OF RUSSIAN BONDS

In parallel, Washington has been willing to further restrict the access of US institutions to the Russian sovereign debt market.

The banks of U.S They have already been banned from participating in the primary market for non-ruble Russian sovereign bonds since 2019, and in April 2021, the Joe Biden administration extended that ban to primary market bonds that are issued in rubles.

The next step would be to ban the purchase of debt on the secondary market, which would negatively impact Russian bond and currency markets.

REPRISALS AGAINST THE OLIGARCHS

One of the last options U.S put on the table is to sanction members of the Russian Government and the Armed Forces, as well as prominent oligarchs and their families.

Until now, Biden has been cautious about sanctioning Russian oligarchs because two years ago the government of then-president Donald Trump (2017-2021) had to lift the restrictions it had imposed on the Russian giant of the Rusal aluminum, founded by the oligarch Oleg Deripaska.

The sanctions caused tensions with Ireland, France and Germany, where Rusal did business, forcing Washington to back down.

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